Lehman Brothers in London went live over the summer with ADP Wilco’s new UPM Corporate Actions platform, the first client to implement the newly launched Wilco system. Lehman is using UPM Corporate Actions to manage its processing of corporate actions data globally, and will use additional modules of the system which Wilco plans to roll out in the next few weeks.
UPM – for Universal Processing Machine – processes notification events, and alerts interested parties with suggested actions and tasks. At Lehman, the system is being used to alert the firm’s corporate actions desk in London of any events that may affect the firm’s or a client’s position.
In the latter case, event notifications are consolidated into confirmation messages, which are then distributed by e-mail, fax or Telex to inform institutional clients of changes to their positions.
Lehman Brothers officials weren’t available for comment on the implementation.
According to Tom Carey, head of new products at ADP Wilco in London, the UPM platform is processing data from three source types: external corporate actions and market information feeds, such as Reuters and Royalblue’s Fidessa order management system; instrument and party data, supplied by the firm; and position information, again generated by the firm.
UPM monitors the work flow associated with a transaction, and raises the alarm when an event impacts the expected sequence or timeframe of that workflow. It also points to suggested resolutions for getting the transaction back on track.
Through this efficient and prioritized allocation of corporate actions task, the system is aimed at reducing operational risk. Tasks are prioritized according to individual users’ preferences; the system also supports dynamic exception handling.
At Lehman, UPM is integrated with the firm’s proprietary data-cleansing engine, which scrubs data and announcements from the market, and position management systems, which contain the firm’s internal books and records. According to Carey, the system will be used to handle all instrument types Lehman processes.
Java-based UPM is deployed on a small Linux-based server farm located at Lehman’s London offices. The implementation marks the first time Wilco has used both Java and Linux as the principal technical architecture for its products.
The ADP Wilco Gloss back-office suite has long offered corporate actions capability. Among its features are: support for mandatory, optional and voluntary events; manual or automated event capture; entitlement generation; generation of pre-advices to holders; claims generation; and taxation processing.
UPM is being touted as Wilco’s next-generation platform for corporate actions. The system covers the following event categories:
· Mandatory Benefit Events: bonus issue, free rights entitlement, rights distribution, capital repayment, spin-off, warrant distribution.
· Mandatory Re-Org Events: assimilation, liquidation payment, mandatory call, mandatory conversion, partial bond redemption, stock split, scheme of arrangement, unit split, bond redemption, mandatory acquisition, mandatory equity call, mandatory covered warrant, rights expiry (cash proceeds), stock consolidation, security change.
· Expiry Events: option expiry, warrant expiry, rights expiry.
· Notification-Only Events: AGM, bankruptcy filing, change in par value, for your information, EGM, class action, de-listing, name/code change.
· Voluntary Events: ad hoc conversions, buy back (tender offer), voluntary conversion, bond voluntary call, odd lot tender, voluntary redemption.
· Take-Overs: competing bids, unconditional offers.
· Income Events: cash dividend, coupon payment, cash dividend and currency option, coupon payment and currency option, dividend reinvestment plan, stock dividend, trust distribution, optional dividend, amortized coupon payment, dividend reinvestment plan purchase, optional scrip dividend.
· Subscription Events: ad hoc call warrant, ad hoc covered warrant, rights subscription, call warrant exercise, priority subscription, voluntary equity call.
· Optional Events: optional covered warrant, spin-off with election, optional scheme of arrangement.
In addition, the system performs several functions related to the corporate actions lifecycle. These include:
· Proactive work flow management
· Capture, enrichment and storage of events
· Identification of entitled holdings and transactions
· Entitlement calculation
· Taxation – local and withholding
· Holder notification and confirmation
· Client election capture
· Claims processing and transformation processing.
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